Monday 04/28/14

Bunge started operations this past weekend at its new port terminal in the northern Brazilian city of Vila do Conde, marking what the local farm sector hopes will be the start of a new era of better grain export logistics.

Sitting at the mouth of the Amazon River, the terminal is the first of a series of grain port facilities due to be opened in the north over the next few years, which farm leaders hope will eventually dispatch over half of Brazil's massive soybean exports.

With Brazil's existing grain port and transport infrastructure struggling to cope with the deluge of beans that arrive from February each year, the new ports are vital for the continued growth of soy production.

The new ports are not only often closer to the fast-expanding grain fields of the Cerrado but will be supplied by barge and train, which are much more efficient over long distances than the trucks currently employed.

After months of waiting for operating licenses, Bunge's new Terfron terminal was officially opened by Brazilian President Dilma Rousseff on Friday and has already loaded its first Panamax with 60,000 metric tons of soybeans destined for Spain.

Bunge hopes to export 2 million metric tons (mmt) of soybeans and corn through the terminal in 2014, increasing to 4 mmt in 2015.

The soybeans are brought up from northern Mato Grosso, 700 miles along the BR163 road to Miritituba and then barged another 700 miles to Terfron. It's an arduous journey but more efficient than sending soybeans the equivalent distance along busy southeastern highways to Santos port, where ships can wait as much as three months to load.

There are another seven companies building barge terminals at Miritituba to supply new terminals in the same region as Vila do Conde with total investments of about R$2.3 billion, according to Renato Pavan of Macrologistica, a Brazilian logistics consultancy.

"We are diversifying the country's logistics matrix, which is still very dependent on trucks and trains," said Murilo Braz Sant'Anna, vice president of agribusiness at Bunge Brasil.

High logistics costs have long been the Achilles heel of the Brazilian soybean industry. The new northern export corridors could reduce freight from northern Mato Grosso by up to 34%, according to Edeon Vaz, logistics specialist at the Mato Grosso Soybean and Corn Growers Association (APROSOJA).

Other experts put the figure lower, but the new routes will certainly relieve the pressure on infrastructure in south and southeastern Brazil that has caused freight prices to jump in recent years.

Over the last 20 years, Brazil's grain production has grown in areas distant from the established export infrastructure and the industry has long looked at increasing shipments through the north.

Indeed, more soy than you might think already goes north. According to Edeon Vaz, over 20% of Brazil's projected 43 mmt of soybean exports will leave through northern ports in 2013-14. That figure could rise to around 35% in the next couple of years, if other programed projects come on line like Terfron, he added.

There are projects to increase northern port capacity to 61 mmt over the next six to seven years, led by the creation of the Outeiro port project in Belem with a 15 mmt capacity.

However, delays are endemic on these projects, as can be seen in the Terfron case.

Bunge's terminal has been ready for months, standing idle while the soybean harvest arrives in the silos in lieu of its final operating license. Meanwhile, the navy has yet to issue licenses for the barges between Miritituba and Vila do Conde, demanding a period of testing first.

Further up the line, there are also problems. The BR163 road that connects the Mato Grosso soybean fields and the ports is still not completely paved, a decade after the project originally began.

In short, a new era has started, but it will take a couple of years before shipments are really ramped up.

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